Bank of Israel keeps rates steady again after January inflation spike

JERUSALEM, Feb 24 (Reuters) - The Bank of Israel kept short-term interest rates unchanged for a ninth straight meeting on Monday after inflation jumped at the start of 2025 even as economic growth remains weak due to the conflict with Palestinian Islamist group Hamas in Gaza.

The central bank - which has expressed worries about Israel's investor risk premium that has recently dropped after a spike following the start of the war in October 2023 - left its benchmark rate ILINR=ECI at 4.50%.

It reduced the rate by 25 basis points in January last year after inflation eased and economic growth slowed amid the Gaza war, but has kept policy steady since and said it is in no rush to ease again while inflation remains above target.

All 13 analysts polled by Reuters had expected no rate move on Monday.

With taxes and electricity and water prices rising at the start of this year, the annual inflation rate ILCPIY=ECI accelerated to 3.8% in January, its highest level since September 2023, from 3.2% in December and staying above the government's 1-3% annual target.

The economy grew by an annualised 2.5% in the fourth quarter, well below expectations, and 1% for all of 2024.